Bangladesh National Insurance Company Limited

Bangladesh National Insurance Company Limited (If there is any contrary information please communicate with DSE through email: [email protected]) Dis...
Author: Gary McKenzie
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Bangladesh National Insurance Company Limited (If there is any contrary information please communicate with DSE through email: [email protected])

Disclaimer: The contents of this presentation are entirely based on disclosures made by the company. Therefore, DSE does not assume any responsibility on the authenticity of the facts and figures presented thereof.

Brief Overview of the Company 1. Date of Incorporation

: 21 May 1996.

2. Commencement of business

: 21 May 1996.

3. Authorized Capital

: Tk. 200 million

4. Paid up Capital

: Tk. 60 million

5. Number of Employees

: 246

Details of the Issue

Description

Ordinary Shares

Public Offering

900,000

Face Value In Taka 100

Premium In Taka 50

Offer Value In Taka 150

Total Premium In Taka 45,000,000

Paid up Capital after IPO Particulars Pre-IPO Paid up capital IPO Paid up capital after IPO

Ordinary Shares 600,000 900,000 1,500,000

Face Value (Tk.) 100 100 100

Issue Managers

: Prime Finance & Investment Limited.

Auditor

: M. Ruhul Amin & Co.

Capital in Taka 60,000,000 90,000,000 150,000,000

Capital in Taka 90,000,000

Bangladesh National Insurance Company Limited At a glance Bangladesh National Insurance Company Limited (BNICL) was incorporated in Bangladesh as a public limited company on 21 May 1996 under the Companies Act, 1994 and licensed under the Insurance Act, 1938 in order to run all types of general insurance business other than life insurance business. It obtained certificate of commencement of business on 21 May 1996 with an authorized and paid up capital of Tk. 200 million and Tk. 60 million respectively. It got registration from Controller of Insurance on 18 June 1996. As on 31 December 2009, the Company has been operating its business through 15 branches along with one local office. The branches are located in different strategically important areas of the country. Directors and officers Information regarding directorship Sl. No. Name of Directors 1 Abdul Baset Majumder

Position Chairman

2

Mostafa Kamal

3

Beauty Akter

Director

4

Md. Yasin

Director

5

Md. Abdur Rouf

Director

6

Director

8

Tahmina Akther Mohammad Sayed Ahmed (Raza) Tanjima Binthe Mostafa

9

Farida Akter

Director

7

Vice Chairman

Director Director

Directors’ involvement in other organization Name and Position

Involvement in other organization Name of the Organization Position

Abdul Baset Majumder Chairman

N/A

N/A

Mostafa Kamal Vice Chairman

United Salt Industries Ltd. Meghna Dairy and Food Products Ltd. Kamal Trading Company Ltd. Kamal Imports & Exports Ltd. United Fibre Industries Ltd. Meghna Vegetable Oil Industries Ltd. Bagdad Vegetable Oil Industries Ltd. United Feeds Ltd. Unique Cement Industries Ltd. United Edible Oils Ltd. United Mineral Water & PET Ind. Ltd. Unique Power Plant Ltd. Tanveer Polymer Industries Ltd. Unique Hatchery & Feeds Ltd. Tanveer Food Limited Tanveer Oils Limited Tanveer Mustard Oil Mill & Coconut Oil Mills Ltd. Tanveer Dal Mill & Flour Mills Ltd. United Sugar Mills Ltd. Unique Power Plant Ltd. Unit-II Tanveer Paper Mills Ltd. Janata Flour and Dal Mills Ltd.

Chairman & MD “ “ “ “ “ “ “ “ “ “ “ “ “ “ “ “ “ “ “ “ “

Beauty Akter Director

Name and Position

Everest Power Generation Co. Ltd. Global AD Star Bag Industries Ltd. Dhaka Plastic Bottle (PET) Ind. Ltd. Tasnim Chemical Complex Ltd. Tasnim Condensed Milk Ltd. Sonargaon Salt Industries Ltd. United Salt Industries Ltd. Meghna Dairy and Food Products Ltd. Kamal Trading Co. Ltd. Kamal Import & Export Ltd. United Fibre Industries Ltd. Meghna Vegetable Oil Ind. Ltd. Bagdad Vegetable Oil Ind. Ltd. United Feeds Limited Unique Cement Industries Ltd. United Edible Oil Oils Ltd. United Mineral Water & PET Ind. Ltd. Unique Power Plant Ltd. Tanveer Polymer Industries Ltd. Unique Hatchery & Feeds Ltd. Tanveer Food Limited Tanveer Oils Limited Tanveer Mustard Oils Mills & Coconut Oil Mills Ltd. Tanveer Dal Mill & Flour Mills Ltd. United Sugar Mills Ltd. Unique Power Plant Ltd. Unit-II Tanveer Paper Mills Ltd. Everest Power Generation Co. Ltd. Global AD Star Bag Industries Ltd. Dhaka Plastic Bottle (PET) Ind. Ltd. Tasnim Condensed Milk Ltd.

“ “ “ “ “ “ Director “ “ “ “ “ “ “ “ “ “ “ “ “ “ “ “ “ “ “ “ “ “ “ “

Involvement in other organization Name of the Organization Position

Md. Yasin Director

Aysha Flour & Dal Mills Ltd. Aysha Mustard & Coconut Oil Mills Ltd. Ozana Cab Limited Farhana Food Products K.S. Abdul Hakim Sons & Co. Masers Joy Enterprise

Chairman & MD “ “ “ “ “

Md. Abdur Rouf Director

Oriental Communications Ltd. Agro Commodities International

Director “

Tahmina Akther Director

United Salt Industries Ltd. United Fibre Industries Limited United Feeds Limited United Edible Oils Limited United Mineral Water & Pet Ind. Ltd. United Cement Industries Ltd. Unique Power Plant Limited Tanveer Polymer Industries Ltd. Unique Hatchery & Feeds Ltd. Tanveer Oils Limited United Sugar Mills Ltd. Tanveer Food Limited Unique Power Plant Ltd. Unit-II Tanveer Paper Mills Ltd. Everest Power Generation Co. Ltd. Janata Flour & Dal Mills Ltd.

Director “ “ “ “ “ “ “ “ “ “ “ “ “ “ “

Global AD Star Bag Industries Ltd. Dhaka Plastic Bottle (PET) Ind. Ltd.

“ “

Tasnim Chemical Complex Ltd. Tasnim Condensed Milk Ltd. Sonargaon Salt Industries Limited

“ “ “

Mohammad Sayed Ahmed (Raza) Director

N/A

N/A

Tanjima Binthe Mostafa Director

United Salt Industries Ltd. Tanveer Polymer Industries Ltd. Unique Hatchery & Feeds Ltd. Tanveer Oils Limited Tanveer Food Limited United Sugar Mills Ltd. Tanveer Paper Mills Ltd. Everest Power Generation Co. Ltd. Janata Flour & Dal Mills Ltd. Global AD Star Bag Industries Ltd. Dhaka Plastic Bottle (PET) Ind. Ltd. Tasnim Chemical Complex Ltd. Tasnim Condensed Milk Ltd. Sonargaon Salt Industries Ltd.

Director “ “ “ “ “ “ “ “ “ “ “ “ “

Farida Akter Director

N/A

N/A

Family relationship among Directors and top five Officers There is no family relationship among directors and top five officers of Bangladesh National Insurance Company Limited except the following: Sl. 1

Name Abdul Baset Majumder Chairman

Family Relationship Father of Mr. Mohammad Sayed Ahmed (Raza)

2

Mostafa Kamal Vice Chairman

Husband of Mrs. Beauty Akter Father of Mrs. Tahmina Akhter and Ms. Tanjima Binthe Mostafa Brother of Mr. Md. Yasin.

3

Beauty Akter Director

Wife of Mr. Mostafa Kamal Mother of Mrs. Tahmina Akhter and Ms. Tanjima Binthe Mostafa Sister in law of Mr. Md. Yasin

4

Md. Yasin Director

Brother of Mr. Mostafa Kamal Brother in law of Mrs. Beauty Akter Uncle of Mrs. Tahmina Akhter and Ms. Tanjima Binthe Mostafa

5

Md. Abdur Rouf Director

6

Tahmina Akther Director

7

Mohammad Sayed Ahmed (Raza)

Husband of Mrs. Farida Akter Daughter of Mr. Mostafa Kamal and Mrs. Beauty Akter Sister of Ms. Tanjima Binthe Mostafa Niece of Mr. Md. Yasin Son of Mr. Abdul Baset Majumder

Director

8

Tanjima Binthe Mostafa Director

9

Farida Akter Director

Daughter of Mr. Mostafa Kamal and Mrs. Beauty Akter Sistere of Mrs. Tahmina Akther Niece of Mr. Md. Yasin Wife of Mr. Abdur Rouf

Ownership of the Company’s Securities Shareholding structure Sl. No.

Name of Shareholder

Status

No. of Shares

% of total Shareholding

1

Abdul Baset Majumder

Chairman

15,000

2.50%

2

Mostafa Kamal

60,000

10.00%

3

Beauty Akter

Vice Chairman Director

20,000

3.33%

4

Md. Yasin

Director

120,000

20.00%

5

Md. Abdur Rouf

Director

80,000

13.33%

6

Tahmina Akther

Director

20,000

3.33%

7

Mohammad Sayed Ahmed (Raza)

Director

5,000

0.83%

8

Tanjima Binthe Mostafa

Director

20,000

3.33%

9

Farida Akter

Director

10,000

1.67%

10

Muhammad Zakaria

120,000

20.00%

11

M.F. Kamal

120,000

20.00%

12

Md. Abu Taher

Share Holder Share Holder Share Holder

10,000

1.67%

600,000

100.00

Total Use of Proceeds:

The Company offers its shares to the public as required by the Insurance Act, 1938 and Insurance Rules, 1958. The net proceeds of the present issue of 900,000 shares of Tk. 150 each including a premium of Tk. 50 per share totaling Tk. 13,50,00,000 will strengthen the capital base of the company and augment business expansion. Tangible assets per share as at 31/12/2009: Sl. A. 1 2 3 4 5 6

Particulars Assets Investment (at cost) (Statutory Deposit with Bangladesh Bank 3 years National Investment Bond) Investment in shares Outstanding premium Interest accrued but not due (On FDR & National Investment Bond) Amount due from other persons or bodies Carrying on Insurance Business Sundry Debtors (Including Advances, Deposits & Prepayments)

Taka 9,000,000.00 1,470,000.00 11,272,743.34 6,852,466.68 5,454,914.46 23,160,054.91

7 8 B. 1 2 3 4 5 C D E F G

Cash and Bank Balances Including Stamp In Hand Fixed Assets (at cost less Dep.) Total Assets Liabilities Balance of fund and accounts Estimated liabilities in respect of outstanding claims whether due or intimated Amount due to other persons or bodies carrying on insurance business Sundry creditors (including provision for expenses and taxes) Other Sums owing (Premium Deposits Account) Total Liabilities Net Asset (A-B) Intangible Asset Net Tangible Asset (C-D) Number of Shares Net tangible assets per share (E/F)

207,657,988.65 3,894,354.99 268,762,523.03 29,550,058.28 74,414,078.00 22,417,092.25 15,631,928.10 2,584,838.03 144,597,994.66 124,164,528.37 124,164,528.37 600,000 206.94

Determination of Offering Price The issue price at Tk. 150 each including a premium of Tk. 50 per share is justified as per the guidelines of the Securities and Exchange Commission as detailed below: (i) Net Asset Value per Share The offering price of the common stock of Bangladesh National Insurance Co. Ltd. has been determined by assessing the Net Asset Value (NAV). The financial calculations are presented form the audited accounts as at December 31, 2009. Sl. Particulars A. Assets 1 Investment (at cost) (Statutory Deposit with Bangladesh Bank 3 years Investment 2 National Investment in sharesBond) 3 4 5 6 7 8

Outstanding premium Interest accrued but not due (On FDR & National Investment Bond) Amount due from other persons or bodies Carrying on Insurance Business Sundry Debtors (Including Advances, Deposits & Prepayments) Cash and Bank Balances Including Stamp In Hand Fixed Assets (at cost less Dep.) Total Assets Liabilities Balance of fund and accounts Estimated liabilities in respect of outstanding claims whether due or intimated Amount due to other persons or bodies carrying on insurance business

B. 1 2 3 4 Sundry creditors (including provision for expenses and taxes) 5 Other Sums owing (Premium Deposits Account) Total Liabilities C. Net Asset (A-B) D. Number of Shares E. Net Assets Value per share (C/D)

Taka 9,000,000 1,470,000 11,272,743 .34 6,852,466 5,454,914 23,160,054 .91 207,657,98 8.65 3,894,354 268,762,52 3.03 29,550,058 .28 74,414,078 .00 22,417,092 .25 15,631,928 .10 2,584,838 144,597,9 94.66 124,164,5 28.37 600,000 206.94

From the above calculation we see that Net Asset Value per share of the Company stands at Tk. 206.94 which is higher than the offering price of Tk. 150 per share. So the offering price of Tk. 150 each including a premium of Tk. 50 per share appears to be justified. (ii)Earning Based Value per share year ended on 31-12-2009 31-12-2008 31-12-2007 31-12-2006 31-12-2005 Average

Net profit 17,523,100.63 8,958,116.97 7,447,889.21 8,087,807.29 4,578,514.83 9,319,085.79

EPS after tax 29.21 14.93 12.41 13.48 7.63 15.53

The weighted average net profit after tax for the last 5 (five) years stands at Tk. 9,319,085.79 and the weighted average EPS stands at Tk. 15.53. At issue price of Tk. 150 each including a premium of Tk. 50 per share, the Price Earning Multiple (P/E) of BNICL stands at 9.65 where as on December 2009 (as per DSE Monthly Review of December 2009) the P/E of insurance industry is 31.39 and overall market P/E is 25.65. If we consider P/E of 31.39 and 25.65, the earning based value of shares of the Company stands at Tk. 487.49 and 398.34 respectively which are much higher than the price offered. (iii)

Projected Earning Based Value per Share Period (year) 2010 2011 2012 Average

Projected EPS 16.88 8.97 11.29 12.38

The weighted average EPS of the Company for next 3 (three) years stands at Tk. 12.38. If we consider the share price of the Company on the basis of DSE overall price earning multiple of 25.65 (DSE Monthly Review, December 2009), the earning based value per share of the Company stands at Tk. 317.54 a price much higher than the price offered. (iv)

Projected Net Asset Value Per Share Period (year) 2010 2011 2012 Average

Projected NAV 179.65 134.34 140.00 151.33

(v) Average market price of similar stocks As on April 2010 there are 44 insurance companies listed in DSE out of which 34 are general insurance companies. Closing prices on last trading days during last six months of the listed general insurance companies are given below: Sl. 1 2 3

Company Name Agrani Insurance Co. Ltd. Asia Insurance Ltd. Asia Pacific Gen. Ins. Co. Ltd.

Closing price (Tk.) on 28 Feb 31 Jan 30 Dec 2010 2010 2009

26 Nov 2009

Average price (Tk.)

471.00

416.25

485.63

998.00

641.50

608.75

808.79

793.50

631.25

657.00

698.79

22 Apr 2010

31 Mar 2010

496.25

489.75

506.00

534.50

791.50

890.00

923.00

668.00

685.25

757.75

4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34

BGIC Central Insurance City Gen. Insurance Co. Ltd. Continental Insurance Ltd. Dhaka Insurance Ltd. Eastern Insurance Eastland Insurance Federal Insurance Global Insurance Ltd. Green Delta Insurance Islami Insurance BD Ltd. Janata Insurance Karnaphuli Insurance Mercantile Insurance Co. Ltd. Nitol Insurance Co. Ltd. Northern Gen. Ins. Co. Ltd. Paramount Insurance Co. Ltd. Peoples Insurance Phoenix Insurance Pioneer Insurance Pragati Insurance Prime Insurance Provati Insurance Co. Ltd. Purabi Gen. Insurance Reliance Insurance Republic Insurance Co. Ltd. Rupali Insurance Sonar Bangla Insurance Ltd. Standard Insurance Ltd. Takaful Islami Insurance Ltd. United Insurance

599.50 735.75

557.25 961.00

593.25 744.25

573.75 786.50

539.00 739.25

565.50 633.75

571.38 766.75

479.00

473.75

492.25

511.00

479.75

429.25

477.50

499.25

493.75

577.50

526.50

446.50

426.00

494.92

732.75

759.50

763.25

-

-

-

751.83

887.75 968.75 614.00

858.25 1,245.75 606.50

866.00 1,255.50 608.00

889.25 1,291.00 683.00

814.25 932.00 574.75

877.00 953.00 626.50

865.42 1,107.67 618.79

459.00

502.50

669.50

590.75

543.25

566.25

555.21

1,611.00

1,702.25

1,820.50

1,810.00

1,669.75

1,637.75

1,708.54

467.75

466.25

484.25

542.50

499.50

485.75

491.00

969.25

913.75

922.25

978.75

916.25

1,045.25

957.58

698.50

676.75

738.50

807.25

928.50

896.25

790.96

523.00

437.50

444.25

510.50

512.25

423.00

475.08

612.75

603.00

638.00

643.75

610.00

555.50

610.50

547.00

519.00

543.50

583.25

510.00

448.50

525.21

391.00

361.25

372.75

417.25

390.50

352.25

380.83

736.50 823.75 926.25 1,293.50 701.00

685.50 820.25 1,166.75 1,310.00 695.75

839.25 829.25 1,237.50 1,321.20 629.00

1,468.00 966.50 1,310.00 1,523.25 597.25

1,002.75 781.00 1,058.00 1,518.25 458.50

1,010.00 777.00 1,054.75 1,277.75 457.00

957.00 832.96 1,125.54 1,373.99 589.75

560.50

567.75

618.25

625.00

-

-

592.88

1,442.00

1,404.50

1,618.75

1,419.00

1,133.75

1,065.75

1,347.29

1,224.25

1,222.00

1,248.25

1,382.75

1,317.50

1,284.25

1,279.83

488.25

443.50

477.50

471.75

443.00

417.25

456.88

1,057.00

1,043.50

1,071.25

1,164.75

1,088.75

1,131.75

1,092.83

459.00

425.25

441.25

471.75

408.00

377.50

430.46

457.00

427.00

449.00

477.25

472.00

386.00

444.71

604.50

585.50

626.00

659.50

516.75

463.25

575.92

1,555.25

1,503.25

1,592.25

1,339.42 781.82

1,045.50

999.50 1,340.75 Average

Face value of all the above insurance companies is Tk. 100 per share. Hence, from the above table it is clear that average market price of similar companies of insurance sector is 7.82 times higher than that of its face value. Based on this, we may assume that share prices of Bangladesh National Insurance Company Limited would be Tk. 782.

Price analysis at a glance: Sl. 1 2 3 4 5 6

Method Net Asset Value Per Share Earning Based Value per share (considering P/E of Insurance) Earning Based Value per share (considering P/E of market) Projected Earning Based Value Per Share Projected Net Asset Value Per Share Average market price of similar stocks Average

Price (Tk.) 206.94 487.49 398.34 317.54 151.33 781.82 390.58

From the above analyses, it appears that the offer price of Tk. 150 per share including a premium of Tk. 50 each of ordinary shares of Bangladesh National Insurance Company Limited is quite justified and reasonable.



Description of property The company’s business is operated through its Head Office and branch offices. All the offices of the company are situated on rented premises. On 16-02-2010 the company has purchased a floor space of 5,800 sft. on WW Tower, 68 Motijheel Commercial Area, Dhaka-1000.



All the assets of the company are situated at company’s office premises.



The company itself owns the entire property and none is on lease or borrowed.



Neither properties of the company are mortgaged nor have any lien on them.



The properties are purchased in brand new condition. FORM-AA CLASSIFIED SUMMARY OF THE ASSETS IN BANGLADESH OF BANGLADESH NATIONAL INSURANCE COMPANY LIMITED AS AT 31ST DECEMBER, 2009

Sl No.

Class of Assets

1 2 3 4 5 6

Three Years National Investment Bond Fixed Deposit Reserve and Short Term Deposit Accounts with Banks Cash in Hand Outstanding Premium Accrued Interest Other Assets as specified below : a) Advances, Deposits & Prepayments b) Fixed Assets (At cost less Depreciation) c) Stamp in Hand d) Investment in Shares (at cost price) e)Amount due from other persons or bodies carrying on Insurance business Total :

Book Value (TK.) 9,000,000.00 207,020,886.53 576,113.12 11,272,743.34 6,852,466.68 34,040,313.36 23,160,054.91 3,894,354.99 60,989.00 1,470,000.00 5,454,914.46 268,762,523.03

Performance at a Glance: (Tk. in Million) Particulars Net Premium

31-12-2005

31-12-2006

31-12-2007

31-12-2008

31-12-2009

49.33

66.76

74.43

64.74

73.70

35.35%

11.48%

-13.02%

13.84%

5.85

36.02

35.90

21.81

-64.24%

515.92%

-0.33%

-39.26%

46.53

31.79

26.90

30.56

19.19%

-31.67%

-15.40%

13.60%

9.24

9.91

11.00

25.03

57.60%

7.18%

11.04%

127.53%

8.09

7.45

8.96

17.52

57.60%

7.18%

11.04%

127.53%

13.48

12.41

14.94

29.21

76.65%

-7.91%

20.34%

95.50%

185.99

208.19

236.06

268.76

20.23%

11.94%

13.38%

13.86%

94.65

110.52

129.41

144.60

20.63%

16.77%

17.10%

11.73%

Growth Net Claims

16.35

Growth Management Expenses

39.04

Growth Profit Before Taxes

5.86

Growth Profit after Taxes

4.58

Growth Earnings per Share

7.63

Growth Total Assets

154.70

Growth Total Liabilities

78.46

Growth Net Asset Value Growth Total Reserve & Surplus* Growth Underwriting Profit (Loss)

Investment Income

76.24

91.34

97.68

106.64

124.16

19.81%

6.93%

9.18%

16.43%

31.34

37.68

46.64

64.16

93.03%

20.21%

23.79%

37.57%

0.92

-3.15

-2.79

-5.42

5.72

9.79

13.48

13.94

17.57

20.43

37.69%

3.41%

26.04%

16.28%

16.24

Growth Miscellaneous Income

0.16

-

0.24

-

0.53

Total Income

10.87

10.33

11.38

12.15

26.68

-1.50%

6.70%

8.63%

116.29%

152.24

162.80

177.74

206.94

19.81%

6.93%

9.18%

16.43%

600,000

600,000

600,000

600,000

Growth Net Asset Value per Share

127.06

Growth Number of Shares

600,000

IPO Post IPO Number of Shares *Total Reserves = Reserve for exceptional losses + P/L Appropriation Account

900,000 1,500,000

Risk factors & Management’s perceptions about the risks Any investment always associates with risks. Among those risks some can be averted, others are beyond control. Before making any investment decision, Investors should take the risk factors into consideration. Major such risk factors are described in brief as under: Interest rate risks Volatility of money market may influences the overall interest rate structure of the country. Other than underwriting profit earned, profitability of the company also depends on interest rate structure. In 2009 the company has earned Tk. 20,430,320.01 as interest income which is 81.63% of the total net profit before tax. So, any unfavorable change in interest rate structure may affect the company’s business adversely. Management perception As the company does not have any bank loan, rise in interest rate will not affect the company adversely. On the other hand, if interest rate falls, the company will go for alternative investment schemes to utilize its funds. Exchange rate risks Taka has been devalued significantly against dollar and it is very unlikely of any immediate appreciation of Taka. But devaluation of local currency against major international currencies may not affect the company’s insurance business. Management perception Since BNICL is not engaged into any insurance business in foreign currency, exchange rate risk is not relevant here. Industry risks The Company is operating in a highly competitive industry. Presently, 44 General insurance companies including the SBC are operating in the country. BNICL has to face stiff competition arising from the existing 43 general insurance companies excluding SBC. Management perception The company has successfully accessed the market till date with a proactive approach by a group of professional and vast experienced peoples. Therefore the company is working on offering services at competitive terms. Despite the extreme competition, BNICL’s business operation shows satisfactory performance. Market and technology-related risks To be competitive in the market, insurance companies need to develop new services/products and offer excellent clientele services and also to expand the market by bringing more and more items under the preview of insurance otherwise the competitors may take away company’s business.

Management perception Insurance business globally is increasing. Industrialization and other infrastructure of the country are remarkably developing; as such the general insurance business is increasing day by day. New items are coming under the cover of insurance. The market is expanding as people are realizing the importance of insurance. Because of the company’s excellent services and introduction of new products, the company faces a very low degree of market and technological related risk. Potential or existing government regulations Government policy change in respect of rates of premium, underwriting commission, agent’s commission reinsurance commission, interest on deposits etc. may affect income and profitability of the company. Management perception The Government has proposed new Insurance Act and Rules and tries to shift the responsibility of insurance sector to Ministry of Finance from Ministry of Commerce to establish the discipline and corporate culture in this industry. Therefore a positive impact is expected on insurance companies. Potential changes in global or national policies Changes in government policy as well as policy of foreign countries may affect adversely the business of the company. Any structural change in the international insurance business adversely affecting the insurance business may have negative impact on the profitability of the Company. Management perception The history of insurance/re-insurance business for over two hundred years proves that any major structural change affecting reinsurance business is unimaginable. Any such event would create a global destabilization, which the major economies must not cause to happen. History of non-operation If a company becomes non-operative for some period in its operating life then risk of becoming non-operative in future for the same reasons or other probable reasons should be considered carefully. Management perception The Company does not have any history of non- operation so no risk has arise in this respect. Moreover the Company is operating its business all over the country through 15 branches and financial strength of the Company is very high. So, chance of becoming non-operative in future is almost zero. Operations risks Political and social condition may affect smooth operation of the business resulting in drastic fall to the value of its investment. Moreover according to letter bs-cªtextwbt-52/1/99-

1907 dated 22-11-2007 and letter bs-cªtextwbt-52/1/99-05 dated 4-1-2009 of the Chief Controller of Insurance, a penalty was imposed for failing to float shares to the public from 17-121999 to 30-11-2008. A total fine of Tk. 3,280,000 was imposed which is already paid.

Any further penalty imposed by the Chief Controller of Insurance may affect the profitability of the Company adversely. Management perception There is no record of reduction in the premium income of the company arising from political unrest in the past. Moreover insured are very much careful to take risk coverage on their properties. Therefore premium income ratio is increased at the time of political unrest. On the other hand, if any amount of penalty is imposed by the Chief Controller of Insurance, it will not significantly affect the profitability of the Company.

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